Buying a home can be intimidating if you’re not familiar with the terms used throughout the process. To point you in the right direction, here’s a list of some of the most common language you’ll hear along the way.
Appraisal: This is a professional analysis used to estimate the value of a home. Getting an appraisal is a required step in validating a home's worth to you and your lender when you are getting a mortgage. If you are purchasing with cash, an appraisal is optional.
Closing Costs: This refers to all of the fees required to complete the real estate transaction and are paid at closing. As a buyer, most of your costs will be related to your mortgage. But you will also pay your attorney (required in Illinois), title insurance, homeowner's insurance (this is just your first payment - your lender will require that you have continuous homeowner's insurance as part of the terms of your mortgage), local transfer taxes if any (this depends on the municipality), and recording fees (this puts information into the public record that you are the new owner of the property).
Credit Score: Your credit score is a number ranging from 300 - 850 that's based on an analysis of your credit history. This helps lenders determine the likelihood that you will repay future debts.
Down Payment: When buying a house, usually the buyer pays a portion of the purchase price with cash and takes out a mortgage for the rest. Down payments are typically 3% - 20% of the purchase price. There are some programs that allow you to purchase with 0% down payment that may be available to you, depending on your situation. Ask your lender for more information.
Home Inspection: It is the responsibility of the buyer to hire an independent 3rd party (licensed by the State of Illinois) to perform a detailed inspection of the property. Some optional services that you can include are radon testing, thermal imaging (to look for heat loss and plumbing leaks, for example), and a video of the sewer line.
Mortgage: A loan that is specifically for purchasing a home is called a mortgage. If you are a veteran (having served in the military), or a first-time home buyer, you may be able to get special terms for your mortgage. Be sure to ask your lender if you qualify for any of these programs.
Mortgage Rate: The interest rate you pay to borrow money when buying a home is your mortgage rate. The lower the rate, the better. Note that interest rates right now are at historically low levels.
Pre-Approval Letter: Once your lender has checked your credit score and verified other key information, they can provide a pre-approval letter indicating that you qualify for a mortgage of a specific amount. This is a critical step in today's competitive market. Many sellers won't consider your offer unless you have a pre-approval letter. This is much better than a pre-qualification letter, which is just based on what you've told the lender, without any verification.
Real Estate Professional: Real estate professionals are licensed by the state to buy, sell or rent real estate. They will help you understand and work through the confusing paperwork, find your dream home, negotiate any of the details that come up, and provide you with information so you know exactly what's going on in the housing market.
Real Estate Agent/Broker/Realtor® - what's the difference? In Illinois if you have a professional real estate license you are a Real Estate Broker or a Residential Leasing Agent. Real Estate Brokers help people buy, sell or rent residential real property. They act as an intermediary between sellers and buyers and help draw up the necessary legal paperwork to complete transactions. A Residential Leasing Agent works with property owners to market and show their residential properties and attract good tenants. Some people may refer to these professionals as “agents” but in Illinois that term is not a recognized licensed designation.
A REALTOR® is a real estate broker who belongs to their local and state association of realtors in addition to belonging to the National Association of REALTORS® (NAR). The term REALTOR® is a registered collective membership mark that identifies a real estate professional who is a member of the NAR and subscribes to its strict Code of Ethics.
To maintain your license in Illinois, you must regularly take and pass rigorous continuing education classes which cover new real estate legislation, fair housing laws and practices, the NAR code of ethics and much more.
I am a broker and a REALTOR® and my business is based on relationships and trust. I would love to help you find your dream home. Please reach out to me with any questions.
